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This article comes from Anthony Fontana from the Quicken Loans Zing! blog.
For some of us, the end of 2013 just signals the beginning of 2014. Not a whole lot changes aside from writing 2014 at the end of a date. However, the end of this year is different. Why, you ask? Because FHA loan limits are set to expire. Beginning in 2014, loan limits will readjust to Fannie Mae and Freddie Mac conforming limits.
Throughout most of the country, Fannie Mae and Freddie Mac conforming loan limits are $417,000, while expensive housing markets such as California and Hawaii increase to $625,000. What does this mean for you? Mortgage applicants who no longer qualify under the revised limits will be forced to shop for a jumbo loan. In many cases, this could present a challenge due to tougher credit score and financial reserve requirements. Also, larger down payments are also a part of the process.
In some cases, clients may have to settle for an adjustable-rate mortgage instead of a fixed-rate mortgage. In others, it may be necessary to get a higher-rate second mortgage to be able to afford the down payment. Edward DeMarco, acting director of the agency that oversees Fannie and Freddie in conservatorship, recently spoke at a meeting in Washington. He stated that there are serious considerations on reducing loan maximums to lessen the federal government involvement in the mortgage market.
While DeMarco didn’t offer any specifics, industry analysts believe the maximum Fannie-Freddie loan size could drop from the current $417,000 to $400,000 in most parts of the country, and from $625,000 to $600,000 in high-cost areas such as coastal California, metropolitan Washington, D.C., and New York City. These changes are in addition to the rules regarding qualified mortgages, also set to be in place in early 2014.
I can already hear the commotion. What this really comes down to is having a sense of urgency. The sooner you act, the better for you. For those of you in high-cost areas, it’s imperative for you to take action before the changes take effect. If you wait, a jumbo mortgage could be your only financing option.
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